August 12, 2022
Astonished Democrats set to clear finish line with climate, tax, health care package - Mike Lillis, The Hill.
House Democrats of all stripes are lining up to approve the Senate’s $740 billion tax-and-spending package on Friday when the lower chamber returns briefly to Washington, sending the legislation to Biden’s desk and securing a huge win for the president and his party less than three months from the midterm elections.
It seems likely the bill could clear the House without a single Democratic defection, whether from the left or center of the party.
House Set to Pass Democrats’ Climate, Healthcare and Tax Package - Siobhan Hughes, Wall Street Journal ($):
The vote comes less than a week after the Senate passed the measure. It imposes new taxes on large, profitable corporations, spends $87 billion over a decade on new workers and technology at the Internal Revenue Service, caps insulin costs for Medicare recipients, puts Medicare on course to negotiate drug prices and funds hundreds of billions in tax subsidies intended to combat climate change.
Along with a new 15% corporate minimum tax, the bill creates a 1% excise tax on companies’ stock buybacks and sets aside roughly $300 billion for reducing the deficit.
Biden’s Simple Tax Pledge Makes for Tricky Implementation for IRS - Jonathan Curry, Tax Notes ($):
The Biden administration has gone to great lengths to emphasize that it won’t raise audit rates for the sub-$400,000 crowd beyond recent norms, but what that will look like in practice is still obscure.
The simple language of the pledge contrasts with its presumptive execution. “As a technical matter, it could be very difficult to write that instruction into law,” said Steve Wamhoff of the Institute on Taxation and Economic Policy. The more precise goal is to increase audits of individuals with more than $400,000 of actual income, and you might not know someone’s actual income until after they’re audited, he said.
Exactly. Is that $400,000 before or after the audit? You don't know until you've done the audit. If you won't audit anyone who reports less than $400,000 of income, you are telling them exactly how much they need to cheat.
If the IRS Gets $80 Billion, Will Its Agents Come Gunning for You? - Janet Holtzblatt, TaxVox. "About $46 billion—or 57 percent—would be allocated to tax enforcement. That’s spurred the claims that the IRS will deploy as many as 87,000 new agents—'an army of auditors' — who will flyspeck the returns of an additional 700,000 Walmart shoppers. Some conservative commenters have gone even further, warning that those agents will be carrying guns."
Dem Tax Bill Keeps Flawed Loss Limit, Undoing COVID Aid - Stephen Cooper, Law360 Tax Authority ($):
House lawmakers are set to approve the Inflation Reduction Act, which passed the Senate earlier this week with a two-year extension of the Tax Cuts and Jobs Act 's $500,000 cap on pass-through business losses used to offset nonbusiness income.
The Senate missed a clear opportunity to fix a problem with the loss provision that would have smoothed out the way those losses are carried forward, said Andy Howlett of Miller & Chevalier Chtd. Moreover, the two-year expansion of the provision until 2029 is tantamount to clawing back part of the tax benefit that Congress granted to these businesses and investors in earlier pandemic legislation.
The flaw of the limit on non-passive business loss is not how it is carried forward. It's that it exists.
Critics Recall BURP in Debate Over Corporate Minimum Tax - Lauren Loricchio, Tax Notes ($):
Opponents of the corporate minimum tax included in the budget reconciliation bill have pointed out that the tax isn’t exactly novel — there was a similar tax in the 1980s, which prompted businesses to reduce their reported financial earnings.
Critics of the corporate minimum tax on book income in the Inflation Reduction Act of 2022 (H.R. 5376) have warned that companies responded to the ‘80s BURP adjustment by changing how they reported financial accounting income, which poses risks for financial accounting and the capital markets. But supporters of the tax argue it could make financial statements more accurate.
So tax returns of non-public companies must be the most accurate financial statements of all.
Who Gets Hit by the Inflation Reduction Act Book Minimum Tax? - Cody Kallen and Garrett Watson, Tax Policy Blog. "As a share of its income, the real estate & rental/leasing industry faces the heaviest burden of the book minimum tax, facing a net tax hike of 12.7 percent of its pretax book income, followed by mining, which faces a 4.6 percent tax hike. In dollar terms, the industries that would account for the largest book minimum tax liabilities are manufacturing, at $65.9 billion, followed by finance, insurance, and management at $39.4 billion."
Ark. Will Cut Corp., Individual Income Tax, Offer Tax Credits - Jaqueline McCool, Law360 Tax Authority ($):
Under the bills, the state's top income tax rate for residents, individuals, trusts and estates would be reduced from 5.5% to 4.9% in 2022. The top corporate income tax rate would be reduced from 5.9% to 5.3% in 2023.
Jeremy Horpedahl, assistant professor of economics at University of Central Arkansas, previously told Law360 that one of the most exciting parts of the bills was that they would conform the state to Section 179 of the Internal Revenue Code beginning in 2022. Horpedahl said the conformity would help Arkansas businesses by allowing them to expense some new investments.
The changes were signed by the Arkansas governor yesterday.
Extended deadline to opt in to the New York State pass-through entity tax (PTET) for 2022 - New York State Tax Department:
If you have not yet made the election for 2022, you may opt in to the New York State PTET through September 15, 2022, using the Pass-Through Entity Tax Annual Election application. You must make an estimated payment when you opt in.
Do not wait until the deadline to opt in. Some taxpayers may need assistance from our representatives to update their accounts before they can opt in. Making your election early ensures you have enough time to complete the process before the deadline.
Related: Working Around the SALT Deduction Cap.
IRS.gov – How Usable Is It? (Part Two) - Erin Collins, NTA Blog. "From the very beginning of their journey on IRS.gov, taxpayers face confusion and complexity. They find themselves on a homepage that has nine prominently displayed, high-traffic options that change seasonally. Each option has a very narrow application, such as Get Your Tax Record. Even the broader sounding option, Get Answers to Your Tax Questions, provides answers to only 59 pre-determined questions."
More Changes Are on the Way for Cryptocurrency Tax Reporting - Kelly Phillips Erb, Bloomberg. " While some platforms already provide information about gains and losses to taxpayers, the 2021 infrastructure law attempts to standardize reporting for tax purposes. The intent was to ensure that the IRS gets info and that crypto investors receive the same tax documents that stock traders receive."
Missouri flood victims get new Nov. 15 tax deadline - Kay Bell, Don't Mess With Taxes. "This means individuals who had a valid extension to file their 2021 return, which gives them through Oct. 17 to do so, now have an extra month to file. However, notes the IRS, since filers who got extensions should have paid any tax owed with that Form 4868 request by April 18, any additional tax due with an extended return filed in November will be subject to late penalties and interest."
Third Circuit: Taxpayer's Actions Indicated His Failure to File FBAR Was Willful - Parker Tax Pro Library. "The court agreed with the district court's finding that the taxpayer acted recklessly (and therefore willfully) because he knew or should have known that an FBAR he signed was inaccurate as he checked a box on the form reflecting there was less than $1 million in his account while knowing that his main account had over $1 million in it."
The Book Min Tax and the Return to Worldwide Taxation - Alex Parker, Things of Caesar ($). "The U.S. took major strides towards creating a territorial tax system during the Trump administration, exempting huge chunks of international income from taxation. Now, the pendulum is swinging in the opposite direction, and this could end up becoming a significant dynamic between the U.S. and the rest of the world."
Prince Harry (Part II) – Does US Citizenship Wait in the Royal Wings? What about the Impact on the Royal Family? - Virginia La Torre Jeker, Virginia - US Tax Talk. "Dear Harry, if, after having become a US citizen you regret having made this monumental choice, you should know that getting rid of your US citizenship will be much easier said than done and can harshly impact not only you but your US loved ones."
Former Officials Protected From Retaliation for Official Acts - Chandra Wallace, Tax Notes ($). "In a split decision in United States v. Pate, an Eleventh Circuit panel upheld a tax protester’s conviction for filing false liens against former IRS Commissioner John Koskinen and former Treasury Secretary Jacob Lew in retaliation for IRS actions taken while they were in office."
IRS Accepts Charlie Sheen’s Offer in Compromise Over Tax Debt - Erin McManus, Tax Notes ($):
Actor Charlie Sheen finally got the agreement he was looking for to settle his tax liabilities with the IRS’s acceptance of a $3.1 million offer in compromise.
The IRS Independent Office of Appeals accepted the OIC in a supplemental notice of determination dated July 22, resolving Sheen’s tax liabilities for the 2015, 2017, and 2018 tax years, according to an August 5 status report in Sheen v. Commissioner.
Related: Tax Debt Relief: A Case Study.
A non-skip day. Today is both National Vinyl Record Day and National Middle Child Day. Grown-up middle children everywhere can dust off our albums and put them on without interference from the older siblings or the younger ones, basking in the freedom.
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.